PLAIN ENGLISH GUIDE TO FINANCE
When it comes to
jargon, UK Finance is full of abbreviations to technical terms, so at
ukfolink.co.uk we have broken down nearly fifty terms into plain english.
As an extra bonus we have linked to several Loan and Mortgage providers
who specialise in products specific to the terms within this page.
All links in the below terms will open in new windows...
Adverse Credit
This term is used to describe Credit Problems due to a poor credit
history. The borrower may have CCJ's, Mortgage Arrears and other credit
debt repayment. Abusing credit or failing to meet credit repayments
leads to Adverse Credit. When used to describe: Adverse Credit Mortgages
or Adverse Credit Loans they mean Mortgages or Loans for people with
Credit Problems or Poor Credit Rating.
APR
APR or Annual Percentage Rate is the actual cost of interest on a
loan/mortgage and takes into account the amount of interest you will pay
and the term of the loan/mortgage. So the higher the APR the more you
will pay, the lower the APR, the less you pay. This is the easiest way
to compare loans to gain the best rate for you.
Arrears
Mortgage Arrears is used to describe missed, late or under paid mortgage
repayments. If you stay in arrears you are likely to end up with a
County Court Judgment or CCJ. This can also be described as defaulting
on your mortgage or Mortgage Defaults. A limited number of lenders will
consider lending credit to people with previous credit problems.
Applicant
The person applying for a mortgage or a loan. Single applicant is just
one person and just their income or dual application that takes both
applicants incomes and details into consideration
Application
A document detailing a potential borrower's income, debt and other
obligations to determine credit worthiness. This can initially be done
online but you will eventually have to complete an actual signed
application.
Bad Credit
This another term used to describe Credit Problems due to an adverse
credit history. CCJ's, Mortgage Arrears and other credit debt repayment
problems leads to a Bad Credit Rating. Bad Credit is more of an American
term with the UK more commonly using Poor Credit. When used to describe:
Bad Credit Mortgages or Bad Credit Loans they mean Mortgages or Loans
for people with Credit Problems or a Poor Credit History.
Bankrupt
This occurs when a debtor is unable to pay their debts. The lender(s) or
creditors move to secure what monies they can from any existing assets
(property) held by that person. All property is then administered by the
official receiver.
Bankruptcy
Discharged From Bankruptcy - After a period of time a Bankrupt
Individual can be discharged from bankruptcy. This then releases them
from their financial obligations. There are some lenders that will
provide mortgages for ex-bankrupts.
Black Listed
All your credit history will be stored on databases by credit reference
companies. A lender will check these to find out your credit status. If
you have a severe credit history and your record will be black listed to
note severe risk. Some lenders will still lend on this but the interest
rate will be high until you can improve your credit history.
Broker
An intermediary who assists arranging suitable financial products or
policies for you with a Lender able to provide it at the most
competitive terms. The broker who may be independent or part of a
network and often carries out the administration to do with processing
the loan.
Building Society
Building Societies are mutual organisations regulated by the Building
Societies Act. This means that their members (account or mortgage
holders) actually own the organisation. Building Societies are only
allowed to raise limited external funds and are generally stricter to
whom they lend than Banks and other organisations.
Bailiff
An official representative of the courts, who may call round to
repossess your possessions or house if you cannot keep up on your loan
repayments and fail to reach an agreement with your lender to amend your
repayments.
Bridging loan
This is a short term loan provided by a bank or building society which
covers you if you need to pay for your next home, while still waiting
for the money to come through from the sale of your current home. If you
do require one of these, you must ensure that the funds to repay the
loan will be in place when the loan period expires.
CCJ or County Court
Judgment
If you have not made payment on any debt you have then you will be taken
to Crown Court. If the debt isn't satisfied then a decision or judgment
made in the County Court, normally for the non-payment of that debt will
be registered on your credit file as a CCJ. If the debt is paid or
satisfied and a satisfaction certificate obtained it will be noted on
your credit file. Having unsatisfied CCJ’s will seriously effect your
credit rating and limit the lenders available to you.
Consolidation or Debt
Consolidation
To consolidate your debts means instead of several debts where you are
struggling to meet all the repayments you have just one manageable debt
with a repayment you can afford.
Credit Check
Before lenders consider lending you credit they will undertake a credit
check. A credit check determines your credit history whether you have
any CCJ's, defaults or outstanding credit card bills using the services
of a credit agency (Experian or Equifax). Most high street lenders don't
want anyone with a poor credit history.
Credit Scoring
This process is used by most lenders to determine what level of credit
risk you are. They use a scoring system based on credit history; good or
bad, length at current address, security, employment, income and
answering these questions gives them a score or Credit Rating.
Mainstream lenders only want high scores. However there are lenders who
will find credit to suit your score even if it is a poor credit rating.
The majority of your credit history and suitability will be on a
national credit database but it is up to individual lenders whether the
risk is acceptable.
Compound interest
The interest paid on the principal balance in a mortgage and on the
accrued and unpaid interest of the loan.
Consumer credit act
Act of legislation to define the rules relating to lending money and
aimed at protecting the consumer when credit is agreed with a third
party.
Credit reference
agency
When assessing your application, a mortgage lender will study your
records. These records are held centrally by credit reference agencies,
and contain information for many different aspects of your life.
Debt Consolidation
To consolidate your debts means instead of several debts where you are
struggling to meet all the repayments you have just one manageable debt
with a repayment you can afford. However you are actually increasing
your debt and paying it over a longer period allowing lower monthly
repayments
Defaults
If you have defaulted on a loan or mortgage it means that you are more
than 30 days behind the date your repayment was due. This will be marked
on your credit record and would lead to a CCJ if no payment was received
or received very late.
Debt
Money owed to a lender by a borrower.
Equity
This is the difference between the amount you owe on your current
mortgage and the current value of your property. This amount can be used
in a remortgage to allow money for home improvements, a new car, holiday
of a lifetime or reduce your monthly premiums.
Financial Advisor
Recommend products and services that help individuals plan their income
and expenditure. There are two types: Independent work on behalf of the
client and can choose from any product or service; Tied advisors work on
behalf of their company to recommend their products only.
Hire Purchase
This term is used to describe purchase brought on credit like cars,
electrical items, furniture etc. Usually it is items brought on HP. A
credit check will check to see if you have ever had or still have any
HP's and the payment history of them.
Independent
Independent Financial Advisor or an Independent Mortgage Broker. They
are not attached to a specific mortgage or loan provider so they aim to
get you a highly competitive deal.
Impaired Credit
This refers to the credit rating of an individual who may have CCJs or
maybe behind with payments to personal loans or a mortgage. This phrase
is also applicable to someone who has
been declared bankrupt.
Introducer
A mortgage broker or adviser who introduces a borrower to a potential
lender.
IFA - Independent
Financial Advisor
In theory, these intermediaries should look at the entire financial
market before making a selection and offer unbiased advice and access to
all suitable financial products. they sometimes still have access to
special deals not on offer elsewhere because they may subscribe to a
mortgage panel along with other advisers and brokers. Together they
convince lenders to provide special packages in return for their
continued custom. The only trouble is that they have to deliver a
certain level of business over a year to remain on the panel, so they
may favour some products over others.
Interest rate
This is the percentage of your loan that a lender charges you each year
for the privilege of borrowing money. The prevailing level of interest
charged by lenders depends largely on the economy and the Bank of
England base rate. If the Governor of the Bank of England and the
Monetary Policy Committee are worried about the economy overheating and
causing inflationary pressure, they may raise interest rates. This makes
it more expensive to borrow money and therefore the overall demand for
borrowing is reduced. Since this is one of the most commonly used
instruments for managing the economy, we are subject to fairly frequent
changes in interest rate.
Negative Equity
This means the value of your property is lower than the amount you owe
on your mortgage or secured on it. This will be a problem if you want to
move or maybe considering either a Remortgage or a Secured Loan.
Non Status
This another term used to describe Credit Problems due to an adverse
credit history. CCJ's, Mortgage Arrears and other credit debt repayment
problems leads to being classed as Non Status rather than Status. When
used to describe: Non Status Mortgages or Non Status Loans they mean
Mortgages or Loans for people with Credit Problems or a Poor Credit
History.
Online
You access the internet by a telephone line. So when you are using the
internet you are classed as Online. Nowadays there are thousands of
online businesses offering everything from banking to scrap metal.
Online Mortgage and Loan sites are often introducers for Independent
Financial Advisors. Online businesses can usually offer better prices
and rates because they don't have the overheads of shops, banks or
building societies.
Payment Break
This term is more commonly called a payment holiday. If agreed with your
lender, Payments can be stopped for a limited period whilst you get over
a financial tight spot. Also see Overpayments and Underpayments.
Personal Loan
A personal loan is a term used to cover secured loans and unsecured
loans. This is a loan taken out by a person or persons hence the name
Personal Loan.
Poor Credit
This another term used to describe Credit Problems due to an adverse
credit history. CCJ's, Mortgage Arrears and other credit debt repayment
problems leads to a Poor Credit Rating. Poor Credit is more of an UK
term with America more commonly using Bad Credit. When used to describe:
Poor Credit Mortgages or Poor Credit Loans they mean Mortgages or Loans
for people with Credit Problems or a Poor Credit History.
Quotations
Independent Financial Advisors will give you a FREE Quotation with NO
Obligations detailing the competitive rate package. This includes
repayments, interest, amount you can borrow and total amount payable on
loans. Borrowers are advised to shop around for quotations from
different mortgage lenders and insurance lenders before making a
commitment.
Secured Loan
This is a Personal Loan that uses equity in your home for security to
allow better interest rates than being an Unsecured Loan. You can use
this loan for debt consolidation or home improvement. However, your home
is at risk if you fail to keep up repayments secured on it.
Sub Prime
This is a term used by lenders to describe the sector of Mortgage
Problems. A sub prime mortgage is the same as a Non Status Mortgage, a
Non Standard Mortgage, an Adverse Credit Mortgage, a Poor Credit
Mortgage or a Bad Credit Mortgage. Put simply, it is a Mortgage for
People with Credit Problems.
Security
When a loan is taken out it is 'secured' on a property, the borrower
agrees to the lender creating a charge over the property; the deed makes
reference to the rights and obligations of both parties as detailed in
the Legal Charge. Thus the property is known as the 'security'.
Settlement Figure
The sum quoted in order for the loan to be repaid during the contracted
term.
Status
The credit-worthiness of a potential borrower.
Self Employed
An individual who works for himself/herself. This will include partners
in businesses and professional practices such as lawyers. There are
lenders who specialise in Loans for Self Employed and Mortgages for
Self Employed.
Salary
The money you receive from your employment. Commission, overtime and
bonuses are not normally considered as part of your gross income by the
lender, unless you receive them at a guaranteed level. Any supplementary
payment that is not guaranteed but which can be shown to remain above a
certain level over a period of time can sometimes be taken into account,
though many lenders will only incorporate a portion of this money into
the calculation.
Tenant Loan
A Non-Homeowner or Tenant will take out an unsecured loan because they
have no home to act as security for the Loan. This is a Personal Loan
for Tenants and Non-Homeowners. Interest Rates are usually higher than
Secured Loans but Dragon Finance aims to find you a competitive rate
Tenant Loan or Unsecured Loan.
Typical APR
Mortgage quotations and advertisements will usually show a typical APR
figure in order to comply with the Consumer Credit Act.
Unsecured Loan
A Non-Homeowner or Tenant will take out an unsecured loan because they
have no home to act as security for the Loan. This is a Personal Loan
for Tenants and Non-Homeowners. Interest Rates are usually higher than
Secured Loans but Adverse Monkey aims to find you a competitive rate
Tenant Loan or Unsecured Loan.
Wedding Loan
This can be a Secured Loan or Unsecured Loan if you're a Homeowner or a
Tenant Loan if you're a tenant or Non-Homeowner. An average church
wedding with all the trimmings can cost about £10,000. A wedding loan
can be used to make your or your daughters special day a memorable one.
